NYP Bar and Grill’s financial tailspin began with Seattle eatery’s opening

A Western Washington restaurant chain that started in Whatcom County and expanded to Tacoma has closed after being unable to reorganize in bankruptcy court.

Court documents show NYP Bar and Grill shifted from a Chapter 11 reorganization bankruptcy filing to a Chapter 7 personal filing May 11. A few days later, all Western Washington NYP restaurants were closed.

The Tacoma location, off South 38th Street near the Tacoma Mall, closed May 4 amid a dispute with a local contracting company that claims it wasn’t paid for a more than $670,000 renovation of the restaurant.

The company’s bankruptcy filing indicates debts of more than $2 million. That includes a $1.47 million claim by the Internal Revenue Service for taxes and more than $450,000 owed to Sysco Corp., which distributes food products to restaurants. The filing lists more than 100 businesses, agencies and people owed money.

Mike Novak founded the chain in 2009, first opening in Bellingham and Lynden. In an open letter, Novak said the opening of the downtown Seattle restaurant in 2011 was a major factor in the company falling into financial trouble.

“Almost immediately the store started losing about $5,000 a week, and we fought on to try different ways of marketing it, executing the model etc. to no avail,” Novak said in the letter, adding the Seattle restaurant lost money from the beginning.

He said ownership didn’t close the restaurant earlier because it thought it could make adjustments to get it back on track. Owners also didn’t want to default on a commercial lease or lay off workers.

“Not closing Seattle NYP within a year or two of opening it and having these challenges is the biggest mistake made knowing hindsight,” Novak said.

The problems escalated after the Chapter 11 reorganization filing, Novak said in the letter. The Washington Department of Revenue and the IRS challenged which chapter it would be filed under.

Novak said they conceded to convert the case to Chapter 7, which led to the abrupt closures.

He said in the letter they wanted to close slowly and pay the employees their final paychecks, but the trustee, Virginia Burdette, told him that they would be a priority claim. The closures meant putting 300 people out of work, he said.

“The last thing we wanted to do was to immediately close our locations that remained, but I also was not in a position to defy a court appointed trustee,” Novak said in the letter.

Novak declined to comment beyond the letter.

An attorney representing the trustee declined to comment.

Also known as New York Pizza, the business operated restaurants in Burlington, Everett and Renton. According to court documents, the Seattle restaurant closed soon after the April Chapter 11.

The closure left employees, vendors and landlords wondering what to do next. Brian Finnegan, who owns the building that was home to the Bellingham NYP, said he was told the Bellingham spot was among the restaurants the company was trying to save through reorganization when it was filed in April. When the filing switched to Chapter 7 last week, all assets were turned over to a trustee and the restaurants were shut down.

Before operating NYP, Novak was vice president of Apex Construction, a Bellingham home-building company. His father, Thomas Novak, was president. That company went into a personal bankruptcy protection, leaving behind millions of dollars in unpaid bills and lawsuits in 2008. Novak currently works in real estate in Everett.

According to a report from Seattle television station KIRO 7, some employees were left in the dark about what was happening until the announcement came that the restaurants were closing.

This story was originally published May 21, 2017 at 1:39 PM with the headline "NYP Bar and Grill’s financial tailspin began with Seattle eatery’s opening."